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Health Insurance companies today told the Bombay High Court that it would be difficult to introduce pre-packaged compensation for 42 ailments covered under medical insurance on the basis of the sum insured and the type of hospital.

The court had on August 2 asked the Insurance Regulator and Development Authority (IRDA) to issue guidelines to insurance companies, requiring them to come out with a pre-packaged scheme for the 42 aliments.

However, their lawyer today said such packages were not easily accepted by the hospitals. Also, sometimes the hospitals had the tendency to overcharge.

Also, hospitals can not be graded, the companies said.

The division bench headed by Chief Justice Mohit Shah today gave the insurance companies four weeks to file affidavit explaining why Prue-packaged compensation can not be introduced.

However, activist Gaurang Damani, who has filed a public interest litigation in the HC on the issue, argued that grading of hospitals was not necessary; package rates can be determined in proportion with the sum insured.

Talking about the flaws in the current mediclaim system, Damani said there have been instances where different insurance amounts were given in different cases for the same treatment at the same hospital. If pre-packaging is made available, then the insured person would be able to choose the kind of hospital where he/she wants to be treated, he contended.

Another issue raised by the petition is settlement of claims by Third Party Administrators (TPAs).

Damani said that according to an IRDA affidavit of last year, there were six lakh health insurance claims pending, for amounts totaling Rs 1,200 crore.

This was because the TPAs were settling claims and not the insurance companies themselves, he argued.

The HC had asked the IRDA at an earlier hearing to make it clear that TPAs can only recommend a claim amount, but not settle it.

According to the PIL, there are no uniform guidelines for settlement, and it is done at the whim and the fancy of the TPA.

"TPA receives financial incentives to reduce the claim ratio," Damani said, adding that there was discrimination between individuals and corporates in settlement.

According to the PIL, problems began in July 2010 after public sector insurance companies suddenly stopped offering cashless medi-claim benefits at top hospitals in the metros because of irregularities.